Rumor Regurgitation Time: China To The Rescue... All Over Again

In case one is wondering what lit a fire under the EURUSD and the ES' ass in the past 30 minutes, why it is the trusty old fall back - China, to which all algos respond every single time like stung donkeys as if on command. Because just as the EURUSD was about to retrace the lows as the realization that the EOD rumor was nothing but an infrared herring, something else had to step in an continue to rumor-based levitation. Sure enough, that something was the Chinese central bank.

CHINA PBOC'S ZHOU SAYS HE'S CONFIDENT EU WILL SOLVE CRISIS: MNI

CHINA PBOC'S ZHOU SAYS HE SUPPORTS EU, ECB MEASURES: MNI

PBOC'S ZHOU: CHINA WILL PARTICIPATE IN RESOLVING EU DEBT CRISIS

CHINA PBOC GOVERNOR ZHOU SAYS HE HAS CONFIDENCE IN EURO: MNI

And that's all it took to life the ES by over 10 points in minutes.

Sure enough, it took the market less thatn 24 hours to forget this piece of bailout trivia, from Reuters:

The head of China's $410 billion sovereign wealth fund CIC brushed aside a call by German Chancellor Angela Merkel to buy European government debt, saying such investments were "difficult" for long-term investors.

In comments ahead of a China-EU summit starting on Tuesday, Lou Jiwei, chairman of China Investment Corp (CIC), said any fresh injection of funds into Europe would be in industrial and other real assets, not government bonds.

His comments struck a sharper tone than a commentary in the Communist Party mouthpiece, the People's Daily, which sought to reassure the European Union that China had no intention to "buy up Europe."

China has instructed its banks to embark on a mammoth roll-over of loans to local governments, delaying the country’s reckoning with debts that have clouded its economic prospects.

China’s stimulus response to the global financial crisis saddled its provinces and cities with Rmb10.7tn ($1.7tn) in debts – about a quarter of the country’s output – and more than half those loans are scheduled to come due over the next three years.

Since the principal on many of the loans is not repayable, banks have started extending maturities for local governments to avoid a wave of defaults, bankers and analysts familiar with the matter told the Financial Times. One person briefed on the plan said in some cases the maturities would be extended by as much as four years.

While some analysts have warned that many loans will still go bad and that a roll-over only postpones the problem, government advisers believe that it will give Beijing time to find a more permanent solution to its debt troubles.

“An appropriate maturity extension is in the banks’ interest,” said Fan Jianping, chief economist of the State Information Centre, a think-tank within the government’s powerful planning agency.

Lunatics, meet asylum control room. What is funniest, however, is that everyone forgets that Germany, which saw an implosion in ts industrial production last night, now desperately needs a weak Euro at all costs, even if that means a perpetual crisis in Greece, and pledges of no bailout from China. But then again, "the market" does what SkyNet wants. And what SkyNet wants, only SkyNet comprehends.